Medicaid Pharmacy Cuts Could Shutter 11,000-plus Pharmacies: Study

More than 11,000 pharmacies across the country could close due to reductions in the Medicaid reimbursement rate, according to an economic impact study of the Deficit Reduction Act (DRA) of 2005 released jointly yesterday by the National Association of Chain Drug Stores (NACDS) and the Food Marketing Institute (FMI).

The study found that 11,105 pharmacies - which generate more than 300,000 jobs and add $31.1 billion to the nation's economy -- could be affected.

The report analyzes the potential impact of the DRA on pharmacies, encompassing chain drug stores, independent pharmacies, and mass merchants and supermarkets with pharmacies.
According to the report, pharmacy closures that simply redirect patients to other pharmacies would have a smaller net impact. But pharmacies in rural areas and urban neighborhoods with large Medicaid populations would be unlikely to sustain their businesses and maintain pharmacy access. The loss of pharmacies for these Medicaid participants would adversely affect their health, said NACDS and FMI.

"These cuts threaten to diminish access to medications and pharmacy services, and they also threaten the vitality of communities," said NACDS president and c.e.o. Steven C. Anderson, IOM, CAE. "Pharmacies are the face of neighborhood healthcare, but these cuts could wipe these faces away, particularly in rural and urban areas with higher Medicaid populations."
The Medicaid program pays retail pharmacies a dispensing fee plus a reimbursement rate designed to cover the cost of acquiring the drug from the manufacturer for Medicaid prescriptions. The associations claim that the changes in the Medicaid reimbursement rates under the DRA could dramatically lower pharmacy reimbursement rates.
The study is based on estimates provided in expert testimony by Steven Schondelmeyer, a professor at the University of Minnesota who claimed that 20 percent of pharmacies could close due to the DRA. 
The study finds that the impact of the decrease in reimbursement rates on the number of pharmacies will vary by state. However, the largest percentage reductions in pharmacies are projected in New York (40 percent), the District of Columbia (37 percent), Louisiana (32 percent), West Virginia (30 percent), and Alaska (28 percent).
"In many rural and urban communities, supermarkets provide the only pharmacies able to serve Medicaid patients," said Tim Hammonds, president and c.e.o. at FMI. "By reducing Medicaid reimbursements as this law requires, many pharmacies would be forced to close, and low-income Americans would have to travel many miles to obtain vital medicines." 
The study was conducted for NACDS and FMI by PricewaterhouseCoopers LLP.
This ad will auto-close in 10 seconds